Jaguars seek ways to tackle debt

By VITO STELLINOThe Times-Union,

The Jacksonville Jaguars, facing the financial squeeze of being a small-market team coping with rising player costs, have hired a New York investment-banking firm to find ways to restructure or reduce their $110 million debt, the Times-Union has learned.

One of the options being pursued by Galatioto Sports Partners is to find limited partners willing to invest in the team so the money could be used to pay down the debt.

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Another option is to restructure the bonds to reduce the interest payments. Bill Prescott, the team's senior vice president and chief financial officer, said the current rate is "north of 7 percent.''

The Jaguars, who lost money last year, need to reduce debt in order to become profitable and to field a competitive team.

Jaguars owner Wayne Weaver stressed that one option not being considered is selling the team.

"Just listen to me carefully,'' Weaver said. "I am not selling the team. If and when I'm going to sell, I promise the city will know it first.''

Weaver said Sal Galatioto, the president of Galatioto Sports Partners, found a potential buyer for the majority interest of the team, but the Jaguars owner rejected the offer.

"I said no. I'm not selling,'' Weaver said.

Prescott said Weaver gets inquires about selling a majority interest in the team several times a year and the answer is always the same: the team isn't for sale.

Galatioto has put together a 104-page book, including the team's audited financial figures and the team's lease, to present to potential limited investors.

Prescott said reducing the debt service is one of several cost-cutting options being considered by the team in the wake of the new collective-bargaining agreement that has resulted in the team spending at least 65 percent of its gross revenue on player costs even though the mandated leaguewide average is close to 57.5 percent.

"We've got 35 percent [of revenue] to pay operating costs, overhead and debt service. Debt service is a fixed cost, so this is an effort to explore options to reduce that cost in order to help the team be profitable,'' Prescott said.

Get rid of broadcasters?

Prescott said another option is to eliminate the team's in-house broadcast department and have local TV and radio stations produce the shows.

That could save the team up to $1 million because under the new collective-bargaining agreement, the players get a percentage of the gross revenue without sharing any of the costs. The Jaguars wouldn't have any expenses if the stations produced the shows and then paid a fee to the team or shared sponsor revenue.

"We're looking at everything, including concessions and ticketing, to see how we can operate more efficiently in those areas. We need to operate efficiently to field a competitive team,'' Prescott said.

The fans also have to play a role to keep the team viable in Jacksonville. Prescott said although the Jaguars expect to sell all nonpremium seats to lift the TV blackouts even with an increase in ticket prices this year, the team also needs to sell all 11,200 club seats.

"People worry about this team being in Jacksonville. It really comes down to our gate receipts," he said. "We need fans and businesses to buy those club seats. We sold 10,000 of them in 10 days to convince the NFL to award the expansion team to Jacksonville. As true as it was then, it's still a key as we wait for this community to grow.''

The team fell 800 shy of the club-seat goal last year and had 2,200 club seats available when the selling season started last month.

City needs to grow, too

Prescott said he expects Jacksonville to be a more successful NFL town in 10 to 15 years, but how the community grows is important.

"We need higher-paying jobs [in Jacksonville], and we need to get divisional headquarters. That's important for the growth of Jacksonville and important for our growth because that's the demographic that is going to buy our club seats,'' Prescott said.

Two other important items for the Jaguars are selling stadium naming rights and the implementation of a local revenue sharing deal.

The team may not get a new naming-rights deal this season, but Prescott said it's important to be patient.

Revenue-sharing on agenda

Reaching an agreement on the sharing of local revenue that would cap player costs for the small market teams at 65 percent of gross revenue will be a major item on the agenda at the annual league meetings in Phoenix this month. The large-market teams are trying to get so-called "qualifiers'' that would limit revenue sharing.

If the owners can't reach a consensus, new commissioner Roger Goodell may have to implement a plan.

Prescott said the team suffered a slight loss last year, the third time in this decade the team has said it has lost money. He said the goal is to simply make $1 a year.

The cash crunch was created by the rise in the salary cap from $86 million in 2005 to $109 million this year under the terms of the collective-bargaining agreement.

A $109 million salary cap is no problem for a team such as the Washington Redskins, which grosses over $300 million. But according to figures compiled by the Cincinnati Enquirer, the teams in the bottom third in revenue - like the Jaguars - average only $177 million in revenue.

The revenue disparity also reflects in nonplayer costs. For example, the Enquirer reported that in 2004, the Redskins spent $5.22 million on assistant coaches and the Jaguars spent $3.31 million.

Not everyone owns a team

When Galatioto was asked why investors would put money into a team that is likely to generate only small profits, he said it's a long-term investment because of the appreciation of franchise value and cachet of owning part of a sports team.

"Everybody's got a corporate jet and a house on the beach, but not everybody owns a piece of a sports franchise,'' Galatioto said.

Prescott said the team doesn't expect to have any new investors on board before the end of the upcoming season.

He said he's still optimistic about the future although the small-market teams could face another crunch in 2010, when new stadiums for the New York Giants and Jets and Dallas Cowboys are to open.

"If I've got to be in a small market, this is the small market I want to be in,'' he said.